Calculating Cost Beyond the CBO: $1.8 Trillion for Reid Bill

Mary Katharine Ham

November 19, 2009 12:30 PM

As you may have noticed during the health-care debate, on almost every iteration of the bill, we get a CBO score and then a real cost revealed later, which Democrats reluctantly own up to once confronted with it. For the House bill passed last week, the true cost was $1.2 trillion.

This is because, though my love for Douglas Elmendorf is well-known, Elmendorf has to calculate the bill given to him, which is carefully crafted by Democrats to earn the score they think the President and the American people can stomach with minimal outcry.

On Thursday, the House is expected to pass a $210 billion measure - known as the "doc fix" - that will adjust Medicare payment rates to avoid a 21 percent cut in January and continuing cuts in the years ahead.

The House originally included the provision in its big health care bill. But it was dropped because its steep cost would have meant the bill would add to future federal deficits, violating one of President Obama's central requirements for the health legislation.

The Democrats cite the bills' projected costs from 2010-19. Yet, as the Congressional Budget Office reports, the bill would cost just $9 billion total from 2010 through 2013 - versus $147 billion in 2016 alone. In the first 40 percent of what the Democrats are calling the bill's "first 10 years," only 1 percent of its costs would yet have hit.

As the CBO analysis indicates, the bill's real 10-year costs would start in 2014. And in its true first decade (2014 to 2023), CBO projects the bill's costs to be $1.8 trillion - double the price Reid is advertising.

To pay for the bill, Reid would impose $371.9 billion of new taxes over 10 years, including $67 billion on health insurers; $23 billion in on drug companies; and $20 billion on medical device makers. All of these taxes are likely to be passed directly on to consumers in the former of higher health care costs.

In addition, the bill would tax employer health care plans that cost more than $8,500 for individuals and $23,000 for families. And, during a time of double-digit unemployment, it would hike payroll taxes by 0.5 percent on individuals earning more than $200,000 or couples making $250,000.

The CBO estimates assume that politically unpopular cuts (mostly to Medicare) will actually get implemented, which the office reminds us is "often not the case for major legislation." The report goes on to say that the bill "would put into effect a number of procedures that might be difficult to maintain over a long period of time."